HPCL Q4 Results Review - Higher Throughput But Weak GRM: Dolat Capital

Dolat Capital Report

Hindustan Petroleum Corporation Ltd.’s Q4 FY24 results were above our estimated Ebitda/profit after tax at +9%/+26%, mainly due to better-than-expected marketing margins on oil products, but the reported gross refining margin was much lower and weaker than Singapore GRM.

Vizag RUF commissioning delayed to H2 FY25; Vizag refinery is operating at 13.7 metric million tonne per annum capacity. Rajasthan refinery is expected to be commissioned by end of FY25E; stabilisation will take time of three-six months.

We tweak our FY25E/FY26E EPS estimates by -1%/+3% mainly due to minimal changes in assumptions of marketing margins and volume. We maintain ‘Reduce’ rating but upward revise the target price to Rs 481 (Rs 453) given increase in equity value (due to net debt reduction) and adjustment in other investments.

Our SoTP valuation is built on:

1. Core business (refining plus marketing) enterprise value of Rs 803/share based on 6.6 times forward EV/Ebitda;

2. Investments at 50% discounts to current market price at an EV of Rs 137/share; and

3. Net debt of Rs 459/share.

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